The "highly competitive" US Internet market will only get better, Comcast said.

Comcast this morning confirmed reports that it has struck a deal to buy Time Warner Cable for $45.2 billion in stock, a merger that was blasted by consumer advocates and is sure to receive antitrust scrutiny.

But not to worry, Comcast says—this merger is actually "pro-consumer," and the US cable TV and Internet markets are so "highly competitive" that the Department of Justice and Federal Communications Commission should wave it through.

"While we believe that this transaction is, and will be determined to be, pro-competitive, pro-consumer, and strongly in the public interest when we make our case and seek approval from federal regulators, we recognize that certain competitive concerns might be raised about consolidation of these assets under one roof," Comcast said in a fact sheet. "But we strongly believe that these competitive concerns are already addressed, not only by the highly competitive marketplace in which the new company will vigorously compete for subscribers, but also by existing rules and regulations."

Comcast noted that the deal would bind Time Warner to net neutrality obligations Comcast made when it acquired NBCUniversal. To get that deal approved, Comcast agreed to follow the terms of the FCC's Open Internet Order for seven years regardless of whether that order was overturned in court.

Further Reading

AT&T calls new chairman an "inspired pick," seeks end to "outdated" regulations.

The FCC's anti-blocking and anti-discrimination rules were indeed vacated this year, making that agreement more than just a side note. Comcast purchasing Time Warner would bring "the automatic application of certain NBCUniversal Conditions to the cable systems and related assets acquired from Time Warner Cable," Comcast said. "The FCC’s Open Internet protections will be extended to millions of additional broadband customers, irrespective of whether the FCC re-establishes such protections for other industry participants." Comcast confirmed to Ars, "[w]e agreed to live under all of the FCC’s Open Internet Rules, all would be extended to the Time Warner Cable broadband subscribers."

Those obligations will be lifted in 2018, though. Comcast has also more aggressively adopted data caps than Time Warner, so a merger could expand the number of customers who are penalized for going over download limits. Consumer advocacy groups Public Knowledge and Free Press argued last night that antitrust regulators should squash this merger.

"If Comcast takes over Time Warner Cable, it would yield unprecedented gatekeeper power in several important markets," wrote Public Knowledge Senior Staff Attorney John Bergmayer. "It is already the nation's largest ISP, the nation's largest video provider, and one of the nation's largest home phone providers. It also controls a movie studio, broadcast network, and many popular cable channels. An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content. By raising the costs of its rivals and business partners, an enlarged Comcast would raise costs for consumers, who ultimately pay the bills. It would be able to keep others from innovating, while facing little pressure to improve its own service. New equipment, new services, and new content would have to meet with its approval to stand any chance of succeeding. What's more, it is simply dangerous for a large proportion of our nation's critical communications infrastructure to be in the hands of just one provider."

In an already uncompetitive market with high prices that keep going up and up, a merger of the two biggest cable companies should be unthinkable. This deal would be a disaster for consumers and must be stopped.

...

Comcast will have unprecedented market power over consumers and an unprecedented ability to exert its influence over any channels or businesses that want to reach Comcast's customers.

No one woke up this morning wishing their cable company was bigger or had more control over what they could watch or download. But that—along with higher bills—is the reality they'll face tomorrow unless the Department of Justice and the FCC do their jobs and block this merger. Stopping this kind of deal is exactly why we have antitrust laws.

Americans already hate dealing with the cable guy—and both these giant companies regularly rank among the worst of the worst in consumer surveys. But this deal would be the cable guy on steroids—pumped up, unstoppable and grasping for your wallet.

Comcast will give up some customers to appease regulators

Comcast said it would divest three million subscribers to appease regulators but gain eight million even after the divestitures, "bringing Comcast’s managed subscriber total to approximately 30 million." Comcast did not say which markets it would give up in order to divest three million subscribers or which company it would sell to.

Upon hearing of the transaction, Free Press said it "would give Comcast control of more than a third of the US pay-TV market and more than half of the US triple-play market for video, voice, and Internet service." The divestitures would bring Comcast under 30 percent of the multi-channel video market. The FCC formerly limited cable providers to no more than 30 percent of the overall video marketplace, but that rule was thrown out by a court in 2009.

In addition to getting Time Warner, Comcast said it "will acquire DukeNet Communications and Time Warner Cable's two regional sports networks in Los Angeles, its 26.8% stake of Sterling Entertainment Enterprises, LLC (doing business as SportsNet New York), and its 52 news and local programming channels, including Time Warner Cable News NY1 in New York City."

Time Warner customers should be jumping for joy, Comcast said, as the acquisition "will also result in the accelerated deployment of advanced technology and the development of new and innovative products and services for millions of customers." Significant cost savings and efficiencies due to the merger "will ultimately benefit customers," although Comcast didn't say it would lower prices.

"Scale enables better customer experiences as demonstrated by Comcast," the company said. "Comcast’s scale has enabled the company to create industry leading products like the X1 Entertainment Operating System, increased Internet speeds, comprehensive communications and digital phone products and features, and home management. The national scale created by this merger will improve Comcast’s ability to compete against its national competitors like DirecTV and DISH, as well as telcos like Verizon and AT&T."

In addition to residential markets, Comcast said that buying Time Warner will improve its ability to offer backhaul to wireless carriers and services to enterprises.

"In addition, Comcast will be able to bring to Time Warner Cable business customers enhancements to their package of services that Time Warner Cable does not offer (e.g., hosted voice)," Comcast said. "Many of the cable systems being acquired by Comcast 'fill-in' gaps in our existing service area and add service areas in New York City and Los Angeles. This transaction will be particularly meaningful to super regional businesses (in the NYC, LA, and other markets) with facilities or offices that span both the Comcast and Time Warner footprint. Until now, these regional businesses have not been able to benefit from seamless products and services and previously may have had two accounts. This transaction will provide many operational and cost efficiencies to these businesses. The new additional markets will also allow for synergies and enhanced investment returns, thereby promoting further development of these competitive services."

The merger will not reduce competition, the company said. Since Comcast and Time Warner Cable haven't bothered to compete against each other in any individual markets, "there will be no change in market share in local markets for video, high-speed data, and voice."

Customers have options from satellite, Verizon FiOS, AT&T U-verse, and Google Fiber, proving that the overall market is a competitive one, Comcast said.

"A number of online businesses like Apple, Google, Amazon, Hulu, Netflix, and a host of smaller companies are entering the online video space and trying to position themselves as competitors," Comcast said. "While we view online businesses as complementary to our business, previous antitrust concerns about further cable consolidation are truly antiquated in light of today’s marketplace realities."

In any case, there is already "a wide array of FCC and antitrust rules and conditions from the NBCUniversal transaction in place that more than adequately address any potential vertical foreclosure concerns in the area of video programming," the company said.

Comcast said the acquisition did not include a break-up fee, saying the lack of one reflects its confidence that the deal will be approved. Regulatory review is expected to take 9 to 12 months. Comcast and Time Warner combined reportedly spent $25 million on lobbying in 2013.

For all of Comcast's optimism, the proposed deal will be scrutinized by regulatory agencies that forced AT&T to give up on its dream of acquiring T-Mobile three years ago. Between the Open Internet Order being vacated and Comcast/Time Warner, we're about to get a sense of the regulatory intentions of FCC Chairman Tom Wheeler—who, in one of his previous jobs, headed up the cable industry's top lobbyist group.

Tim Karr of Free Press argued that "Comcast's plan to gobble up TWC should give Wheeler yet another good reason to reclassify ISPs as common carriers," which could let the commission reinstate its net neutrality rules.

The Public Knowledge statement used in this story has been corrected. Comcast is not the country's largest phone provider.

Promoted Comments

Separate Content from Connection. No company providing connections should be in the content business. Comcast operates under a conflict of interest - remove the conflict, make them choose, content or connection but not both!

All I know is that if they do merge, I'm getting rid of TWC internet. It's bad enough that it's one of 3 choices I have for internet, but I'd gladly switch to a slower speed from my local phone company to stick it to them for this crap.

I don't think Comcast and Time Warner overlap much in terms of subscriber areas, so I don't see an issue there. My issue lies more along the lines of Comcast using this new subscriber base to bully content providers into deals that exclude other providers, or just outright buying more channels.

Quick edit, RE: The image at the top of the article. In this episode, the logo on the cable company guys shirt briefly changes to a Comcast logo.

Arguing that Comcast doesn't need new rules in acquiring TWC because they already accepted new rules when they acquired NBC is a bit like arguing that they don't need to clean their room today because they cleaned their room yesterday.

They might have let the Comcast- NBC merger through, but I have a really hard time seeing this one being allowed.

I just don't see how anti-trust regulators let it happen.

I was thinking just the opposite, sadly. Everyone was asleep at the switch when they acquired NBC. I don't see anyone waking up for this little old thing. In fact, with all the animosity towards TWC, I suspect regulators will be happy to see TWC gone by any means.

Seriously, this should raise some really big flashing neon red flags to regulators.... Im probably stupid to even hope for it, but i hope this whole deal reaises awareness about how messed up cable/internet/phone competition is. ie, there is no competition.

I hope it happens. And I hope it's so egregiously bad that Congress has no choice but to act. The internet problem in the US will have to get worse before it gets better. We're only at the "we're rather annoyed" stage, and we need to get to "outright revolt".

LIKE $93 a month is not already to much for internet only. That's what i pay for internet, and it keeps creeping up slowly. Gone up about $20 since 09, and with each price increase is more restrictions. Seems backwards. I seriously doubt the merger will make our internet cheaper.

I had to switch to business class, just to avoid the data caps. Business class is the same price as residential, surprisingly, but over all the speed is not that great for bottom level service, as to be expected.But at nearly 100 bucks it should be much better.

Separate Content from Connection. No company providing connections should be in the content business. Comcast operates under a conflict of interest - remove the conflict, make them choose, content or connection but not both!

Do Comcast and TWC have overlapping geographies? If not, they aren't really direct competitors in any of the markets they own.

To be clear, I think it's a real problem that there is a lack of competition for cable and broadband into the home, but in this case I'm not sure the merger is going to change things. I'd be more concerned if Comcast were merging with Verizon or something similar.

I'm all for this merger. With the provision that Comcast has to build fiber to subscriber homes and after 2-3 years make that available to any other business that wants to run an ISP at an actual reasonable price.

If we included that in any merger deal between companies that are ISPs 1 of 2 things would happen.1.) The whole country would have an open fiber network in 4 years time2.) The ISPs would stop thinking they are the highlander (there can be only one)

I would gladly accept shitty service now if it meant in a few years everyone would be able to get fiber internet. On top of that it would mean that Comcast/etc might actually innovate since they would be on borrowed time since once the 2-3 years is over the cost of becoming an ISP would drop drastically.

Pro-consumer and highly competitive? I bet these guys couldn't keep a straight face while writing that. If most regions had actual competition I would not mind as much, but for the majority of customers you are replacing their sole provider with an even more monolithic one.

As noted in the other thread, while this cannot be spun into a "good thing" for us, at the same time I had no choice anyway. Where I live it was TWC or pound sand. So this gets a big "wish I had owned some TWC stock" meh from me. Wake me up when we have more choices where I live (a very populous region of So Cal, east of LA).